Minister says South Korea's petrochemical companies are on track to reduce their output by up to 3.7 million tons.

South Korea's petrochemical companies are on course to reduce up to 3.7 metric tons of production under a voluntary program to overhaul the oversupplied industry and improve flagging profits margins, said the?industry? minister on Monday.

Kim Jung-kwan, Minister of Industry, said that 16 companies including major naphtha producers had submitted blueprints before the year-end deadline, as requested by the authorities. These blueprints would form the basis for a 'quick way to restructure industry.

The President Lee Jae Myung who was elected in June after a snap poll, promised during his campaign that he would pursue tax support for mergers and purchases in the petrochemical sector and exempt companies of antitrust regulations to allow better coordination in production and operations.

The industry ministry said that a 'final plan', which is expected to be approved by government, would give companies access to incentives for tax and regulation and support for research and development.

Calculations show that the cuts between 2.7 and 3.7 millions metric tons per annum would be equal to around 25% of country's total capacity. This includes a new project which was slated to start next year.

Kim was speaking at a Monday meeting with officials of the company.

South Korea's leading petrochemical firms include LG Chem (which is the world's top producer of ethylene & propylene), GS Caltex, Lotte Chemical, Hanwha TotalEnergies, S-Oil, and HD?Hyundai?Chemical.

Discussions have also taken place on how to restructure Yeochun NCC Co, the third largest ethylene producer in the country. YNCC is a joint-venture between DL Chemicals and Hanwha Solutions. (Reporting and editing by Ed Davies.)

(source: Reuters)